Lunch Break Cut on Tokyo Exchange, Following Hong Kong

Traders work on the floor of the Tokyo Stock Exchange (TSE) in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Nov. 25 (Bloomberg) -- The Tokyo Stock Exchange plans to
shorten its lunch break to one hour, joining Hong Kong in
extending the trading day as Asian bourses intensify competition
for revenue.

Starting next year, the break will run from 11:30 a.m. to
12:30 p.m. local time for spot trading, down from 90 minutes now,
Atsushi Saito, president of the bourse, told reporters in Tokyo
yesterday. That will lengthen the trading day to five hours,
still less than Sydney, Singapore and Seoul.

Hong Kong said this week it’s expanding trading hours to
align more with China, which briefly overtook Japan this year as
the world’s second-largest stock market, behind the U.S. The
average number of shares traded daily in Hong Kong has surged
477 percent from 2005 through October this year, exchange data
show. In Tokyo volumes have fallen 6.6 percent in the same
period, according to data compiled by Bloomberg.

“Considering trading hours in Asia, and the practicality
of this, we decided to shorten the break to increase trading
opportunities,” Saito said. “We calculate that this will
increase trading by around 6 percent.”

The bourse began surveying investors and brokers in July,
and received 128 responses, according to a statement from the
exchange. Seventy percent of respondents were against total
abolition of the break, the statement said.

‘Bigger Pizza?’

“I doubt that volume will increase much as a result of
this,” said Mattia Ciancaleoni, director of equity sales at
Citigroup Global Markets Japan Inc., a unit of Citigroup Inc.
“In some ways it’s like believing you have a bigger pizza just
because you have cut more slices.”

In order to increase trading activity, the bourse
considered extending trading hours by changing the opening and
closing sessions for the whole day, or establishing a night-trading session, according to a statement. This was deemed
“currently difficult,” the exchange said.

“Instead of longer opening hours, they need to raise the
attractiveness of the market first,” said Yoji Takeda, head of
the Asian equity-management team at RBC Investment (Asia) Ltd.,
which oversees $1.1 billion in Hong Kong. He didn’t do the Tokyo
survey. “It probably won’t have much of an effect on the
market.”

Tokyo’s market is currently open from 9 a.m. to 11 a.m. and
12:30 p.m. to 3 p.m. Saito said today he expects the longer
hours will take effect in the first half of next year, once
brokerages are ready.

‘Improve Corporate Governance’

“This will have a relatively modest impact,” said
Citigroup’s Ciancaleoni. “What will lead to higher volume on
the Tokyo Stock Exchange is not so much reducing the lunch break,
but other issues such as better corporate governance or a
recovery in the earnings and momentum of Japanese companies.”

London, Paris and Frankfurt are open for more than 8 hours
daily, while New York trades for 6 1/2. Singapore is proposing
to move to 8 hours from 6 1/2 by abolishing its lunch break.

Hong Kong Exchanges & Clearing Ltd. will cut its
traditional two-hour lunch break, the longest among developed
markets, to 90 minutes from March 7, and to one hour in March
2012. The stock market will open at 9:30 a.m., instead of 10
a.m., with a break at 12:30 p.m., and the close at 4 p.m.

“Getting rid of lunch breaks is not very practical,” Ng
Soo Nam, Singapore-based chief investment officer at Nikko Asset
Management Co., which has $123 billion in assets globally.
“People do need to go for lunch breaks -- not just the traders,
but fund managers like myself.”

‘Not Very Practical’

Even with the break shorter, Japan and Hong Kong will be
among a minority of developed-market exchanges that stop for
food. The main bourses in the U.S., U.K., Australia and Germany
-- where the trading day is 11 hours -- operate without a break.

“The TSE is losing ground in the global market,” said
Takeshi Osawa, a senior fund manager in Tokyo at Norinchukin
Zenkyoren Asset Management Co., which oversees about $22 billion.
“But that’s not something the TSE can change on its own. Unless
the government and companies help make Japanese stocks more
attractive, tweaking the exchange’s system won’t make much of a
difference.”